On the eve of ServiceNow’s annual user event in Las Vegas, diginomica got the chance to sit down with CEO John Donahoe to discuss the vendor’s role in the cloud market and to get a deeper understanding of the role its playing for customers that are adopting cloud tools to rethink the way that they work.
By way of background, Donahoe joined ServiceNow just over two years ago, having been brought in to replace Frank Slootman as CEO, in a bid to help drive the company through its next phase of growth - with the ambition of hitting $10 billion in revenue.
We at diginomica have been covering the company for a number of years now and have been impressed by the way in which Donahoe is executing on the opportunity to broaden the vendor’s role beyond its ITSM roots. We predicted back in 2015 that ServiceNow had an opportunity to be one of the leading cloud platforms, if it could get its strategy right and broaden its scope.
The company, when founded by Fred Luddy, was fundamentally always a platform play, but was created at a time when platform’s weren’t really a ‘thing’.
It’s growth was enabled by its early decision to focus on ITSM. However, ServiceNow is fundamentally a platform that enables companies to redefine workflows for the cloud era - whether that be internally for employees, or externally for customers. In other words, whilst ITSM was its early success, a workflow is a workflow, and can be applied to almost anything. It has has since seen success in areas such as HR, CSM and security, selling on the motto that it “makes the world of work, work better for people”.
This is even more pertinent for ServiceNow in 2019, where customers are adopting a variety of cloud platforms and have the opportunity to re-think their existing workflows.
To put it simply, as we’ve noted before, ServiceNow allows customers to ‘fill in the enterprise white spaces’. It doesn’t necessarily compete with the likes of Salesforce, Workday, or Adobe. Instead it takes an approach that recognises customers are likely to have a multi-platform cloud environments, taps into these systems of record, and allows companies to rethink the way they operate.
Donahoe is doubling down on this approach - which has largely been driven by what ServiceNow customers are telling him. Enterprises have traditionally operated in silos and been forced to work around the technology systems that enable that. ServiceNow blends those hard lines and allows companies to think about what how they *could* operate, in a more frictionless way.
What the customers are saying to me has not changed over the past two years, it's incredibly consistent. Every company has declared digital transformation to be one of their top priorities. What may have evolved, is that ‘digital transformation’ was maybe still more of a buzzword two years ago. Now it’s a strategic requirement.
And by digital transformation, I mean that the CEO is mandating that they have to digitally connect with customers, provide a better digital experience for employees, and use digital technology to drive productivity and efficiency so that they can devote scarce capital resources and talent to innovating for customers.
Cloud is the once in a generation shift where you can get better user experience and significant improvements in productivity, more speed and agility and better compliance.
A multiplier effect
Why what Donahoe says resonates so well, is because he recognises that ServiceNow is not going to be the only vendor in a company’s cloud strategy - nor is it trying to be. He knows that customers are buying multiple platforms to enable this digital change. However, what works to ServiceNow’s advantage, is that it is able, according to Donahoe, to extract additional value from these other platforms in a customer’s multi-platform environment. He says:
Customers are embracing four to six strategic platforms. Almost without fail they are Salesforce, Workday, ServiceNow, Adobe, Office 365, and maybe SAP if they have supply chain. They are going from a world where they have thousands of applications and tools and complexity on premise, to a world of cloud based platforms. They want to put as much as they can in these platforms, and they want out of the box functionality, so that they can ride our innovation curves and dedicate their resources to innovating for their customers.”
But what’s loud and clear, is that customers are saying that ServiceNow is the connective tissue, or the workflow, around the other platforms. ServiceNow is the multiplier. CIOs are telling me that it helps them get 10 times improvement in productivity and value, by stitching all the other platforms together and automating the workflow.
What Donahoe says seems to reflect what is happening on the ground. He notes that over the last several quarters, 30-40% of the company’s annual contract value has come from companies using the software where “software was not being used before”. Donahoe explains:
It’s not just replacing old software with modern cloud software. It's actually using software where it hasn't been used before. Think of employee onboarding - employee onboarding either doesn’t use software or it uses siloed software. Software to get your health plan, payroll, travel etc. ServiceNow can bring all of that together, in an automated, streamlined workflow.
But you need to re engineer your processes. You need to integrate with other systems, you need to drive culture change and change management.
And so you see more and more companies either having an explicit Shared Services Group, or empowering the CIO, and often the CFO, to drive that shared services mindset and experience. It’s about the value creation from these other platforms.
Why is this important? Well, we’ve noted time and time again that putting cloud platforms or SaaS applications into a traditional work environment isn’t going to deliver the real benefit of cloud. Companies need to think differently about how they operate, reducing friction internally and externally - breaking down barriers which were once required by siloed on premise technology. ServiceNow can act as the magic sauce for an enterprise to help do that, as companies really need to redesign their processes and rethink their mode of operation. That’s hard to do. Integration is hard. Changing the way you work is hard. New processes are hard. ServiceNow, if used effectively, goes some way to help ease that pain.